Dabur’s volume growth in 1Q24 was 3% y-o-y, slightly lower than our estimated 5% y-o-y.
However, this dip was primarily due to lower sales in the juices segment, impacted by unseasonal rain. Excluding juices, the volume growth was a promising 6%, indicating a significant improvement compared to the flat growth seen in Q4FY23. This improvement was driven by a surge in rural demand, which we anticipate will continue to strengthen, leading to mid-to-high single-digit volume growth in the future.
The revenue growth in Q1 was impressive at 11% y-o-y, surpassing our estimate of 9% and aligning with Bloomberg’s consensus estimate. This growth was fueled by robust performances in the Digestives, OTC, Home care, and Culinary portfolios, which achieved mid-teens+ percentage growth despite facing a high base. Additionally, Hair care and Oral care experienced sequential improvement as rural demand picked up, resulting in early double-digit growth. However, the skincare, health supplement, and juices segments reported lower single-digit growth. With inflation showing signs of moderation, Nomura anticipates further improvements in growth in future. Dabur’s strong performance in several segments and the resurgence of rural demand bode well for its future prospects.
Gross profit margin (GPM) expanded by 75 bps y-o-y, benefiting from lower raw material prices. However, operating profit margin (OPM) remained flat y-o-y due to a significant increase in advertising spending aimed at supporting future growth. The management plans to continue reinvesting its gross margin expansions into higher advertising and promotion (A&P) in the upcoming quarters, a move that we view positively. For FY24, the management anticipates OPM to stay within the range of 19-20%.
Dabur is targeting Rs 1.5 billion sales in its newly formed Dabur Therapeutic vertical, as it plans to reach 70k allopathy and ayurvedic practitioners. It is targeting Rs 5 billion sales in foods and Rs 500million in its Babycare, as it plans to introduce products in mainstream distribution.